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Global economic overviewGlobal economic overview
Samiran Chakraborty
13 November 2013
Global economic overviewGlobal economic overview
Contents
The story till 2013
• Weak recovery in both DM and EM
• Fiscal discipline
• Low core inflation and continued monetary easing
• Gradual export recovery
• FX markets punish countries slow on reforms• FX markets punish countries slow on reforms
Themes for 2014
• Reversing monetary easing and its impact
• China recovery and what it means for EM
The long – term: EM growth is key to the Super-cycle
Low core inflation and continued monetary easing
cycle
2
Weak recovery from the crisisGDP Q2 2013, rebased to Q1-2008, index
100
102
104
106
90
92
94
96
98
Q1-08 Q1-09 Q1-10
2008, index
Germany
US
Source: Bloomberg, Standard Chartered Research 3
Italy
UK
Japan
Q1-11 Q1-12 Q1-13
Incomes still weak 5.5 years after 2008Change in GDP per capita since Q1-2008 %
-4
-2
0
2
-12
-10
-8
-6
-4
Germany US Japan France
Incomes still weak 5.5 years after 2008-09 crisis2008 %
Source: Bloomberg, Standard Chartered Research 4
Euro area
UK Italy Spain
Large output gaps in developed marketsOutput gap (spare capacity) as % of GDP
-4
-2
0
-10
-8
-6
-4
Japan Germany Canada UK OECD
Large output gaps in developed marketsOutput gap (spare capacity) as % of GDP
Source: OECD, Standard Chartered Research 5
OECD US France Italy Spain
Unemployment is high except in GermanyUnemployment %
2007
10
12
14
2013
0
2
4
6
8
Japan Germany US OECD
Unemployment is high except in Germany
Source: OECD, Standard Chartered Research 6
UK France Italy Euro
Developed markets recovery scorecardThe more asterisks the better
Fix balance sheets
Original asset bubble fully deflated
Healthy household balance sheets
Healthy corporate balance sheets
Healthy banks
Stabilised government debt/low deficitStabilised government debt/low deficit
Other reforms/growth stimulus
Revived ‘animal spirits
SUMMARY – STRUCTURAL (out of 35)
Supportive fiscal policy (2013)
Easy money overall
Low real rates
Cheap currency
Rising asset prices
Lending up to private sector
Healthy money growth
SUMMARY – FISCAL AND MONETARY POLICY (out of 10)
Developed markets recovery scorecard
US Japan UK Spain
***** ***** **** **
***** **** *** *
***** ***** ***** ***
***** **** ** *
*** * ** **
Source: Standard Chartered Research 7
*** * ** **
*** * * ***
*** ** * *
29 22 18 13
* **** ** **
***** *** **** *
**** ** *** *
***** ***** ***** **
***** *** **** *
**** *** ** *
***** *** **** *
6 7 6 3
EM growth has slowed since 2010Real GDP growth % y/y
20108
10
12
2011
2012
0
2
4
6
Brazil China India
EM growth has slowed since 2010
8Source: IMF, Standard Chartered Research
Turkey Russia Indonesia
Major fiscal restraint since 2010 except in JapanCyclically adjusted fiscal balance as % of GDP
20082011
2012
2013
-4
-2
0
20092010
-12
-10
-8
-6
Euro Japan
Major fiscal restraint since 2010 except in JapanCyclically adjusted fiscal balance as % of GDP
Source: OECD, Standard Chartered Research 9
UK US
Core inflation is well below targetCPI ex food and energy, % y/y
2.0
2.5
3.0
Euro area
0.5
1.0
1.5
2.0
Jan-00 Jan-02 Jan-04 Jan-06
US
Source: Bloomberg, Standard Chartered Research 10
Jan-08 Jan-10 Jan-12
World trade has recovered, led by AsiaExport volumes, indexed to pre-recession peak
120
140
160
Q2-08 Q1-09 Q4-09 Q3-
40
60
80
100
World trade has recovered, led by Asiarecession peak
Developing Asia
Source: IMF DOTS, Standard Chartered Research 11
Advanced Economies
World
-10 Q2-11 Q1-12 Q4-12
China, the leading trade powerhouse% of world exports
USA
12%
14%
16%
18%
China
Germany
1960 1965 1970 1975 1980 1985
0%
2%
4%
6%
8%
10%
China, the leading trade powerhouse
Source: IMF DOTS, Standard Chartered Research 12
1985 1990 1995 2000 2005 2010
FX markets punish countries needing reformExchange rate against USD, Jan 2012= 100
120
125
130
135
90
95
100
105
110
115
Jan-12 Apr-12 Jul-12 Oct-12
FX markets punish countries needing reformExchange rate against USD, Jan 2012= 100
INR
IDR
Source: Bloomberg, Standard Chartered Research 13
MXN
TRY
Jan-13 Apr-13 Jul-13
The super-cycle re-assessedThe super-cycle re-assessedassessedassessed
Super-cycles – Global GDP growth
1820-70: 1.7% 1913
5%
10%
1870-1913: 2.7%
-10%
-5%
0%
1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920
Global GDP growth
1913-46: 1.7% 1973-19: 3.0%
Actual global GDP growth
Source: Angus Maddison, IMF, Standard Chartered Research 15
1946-73: 5.0% 2000-30: 3.5%
Average global GDP growth
1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030
The world economy is set to doublUSD tn
Real GDP (2012 prices and market exchange rates)
150
200
250
0
50
100
150
2013
USD 69 tn
ble in real terms, triple in nominal
Real GDP (2012 prices and market exchange rates)
Nominal GDP
USD 223 tn
Source: IMF, Standard Chartered Research 16
Real GDP (2012 prices and dollars)
2030
USD 132 tn
USD 129 tn
2014 – 2030 GDP growth
17
10 largest economies by decadeUSD tn
1990 USD tn 2000 USD tn 2010
1 US 5.9 US 10.3 US
2 Japan 3.1 Japan 4.7 China
3 Germany 1.7 Germany 1.9 Japan
4 France 1.2 UK 1.5 Germany
5 Italy 1.1 France 1.3 France
6 UK 1.0 China 1.2 UK
7 Canada 0.6 Italy 1.1 Italy
8 Spain 0.5 Canada 0.7 Brazil
9 Brazil 0.5 Brazil 0.6 Canada
10 China 0.4 Mexico 0.6 Russia
2010 USD tn 2020 USD tn 2030 USD tn
US 15.0 US 23.5 China 53.8
China 5.9 China 21.9 US 38.5
Japan 5.5 Japan 6.1 India 15.0
Source: Standard Chartered Research 18
Germany 3.3 Germany 5.1 Japan 9.3
France 2.5 India 4.5 Germany 7.4
UK 2.3 Brazil 3.9 Brazil 6.3
Italy 2.0 France 3.9 UK 5.8
Brazil 2.1 UK 3.7 France 5.7
Canada 1.6 Italy 2.7 Indonesia 4.7
Russia 1.5 Russia 2.6 Russia 4.6
EM growth to drive two-thirds of global growth % of total 2012-30 (based on real 2012 prices and dollars)
India
Latam
Asia ex CIJ
US
China
Japan
SSA
CIS
ROW
MENA
EU28
India
0 5 10
thirds of global growth 30 (based on real 2012 prices and dollars)
19
15 20 25 30
Source: IMF, Standard Chartered Research
The world is more open than everWorld exports-to-GDP ratio
25
30
35
0
5
10
15
20
1820 1870 1913 1929 1950 1960 1965 1970 1975
2013F
Source: Angus Maddison, IMF WEO, Standard Chartered Research 20
1975 1980 1985 1990 1995 2000 2005 2010 2030
South-South trade boom to continue % of world trade
25%
30%
35%
0%
5%
10%
15%
20%
2000 2002 2004 2006 2008 2010 2012 2014
South trade boom to continue
Source: IMF, Standard Chartered Research 21
2014 2016 2018 2020 2022 2024 2026 2028 2030
Asia to surpass EU in world trade % of world exports, projections for 2013
30%
40%
50%
0%
10%
20%
30%
1990 2000
Asia to surpass EU in world trade
Asia
Source: IMF, Standard Chartered Research 22
EU
2010 2020 2030
Exports by regionUSD bn
Total exports 2000
China 249
India 42
Asia ex-CIJ 830
Africa 125Africa 125
MENA 30
Latam 365
US 772
EU-27 2,424
Japan 478
ROW 1,064
World 6,379
2012 2030
2,050 17,067
297 2,692
895 949
489 824
Source: IMF DOTS, Standard Chartered Research 23
489 824
1,349 5,609
1,098 4,446
1,546 4,619
5,573 12,097
799 2,427
3,759 23,853
17,855 74,583
Thank YouThank You
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